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Form 100. 2019 Personal Income Tax return

7,4,1,5. Small businesses

A company is considered to be of a small size when the net turnover for the previous year has been less than 10 million euros.

If the previous immediate tax period had been less than one year, or the activity had been carried out for a shorter period, the net turnover will be increased per year.

If the company is newly created, the net turnover must refer to the first tax period in which the activity is actually carried out, raising the figure per year if the period of the financial year had been less than 12 months,

To determine the net turnover, the taxpayer will take into account all the economic activities carried out by the taxpayer.

When a natural person, alone or jointly with the spouse or other natural persons, bound by direct or collateral online kinship links, consanguine or affinity, up to the second degree inclusive, are in relation to other entities of which they are members in any in the cases referred to in Article 42 of the Commercial Code, the net turnover shall relate to all the persons and entities belonging to the group.

Time frame for applying tax incentives when the company with a reduced size exceeds 10 million euros of turnover

Companies with a reduced size that reach or exceed the turnover of 10 million euros in a tax period may, however, continue to apply the tax incentives of your special tax regime during the three tax periods immediately following that period, provided that they have met the conditions for be considered as a small size in that period (in which it reaches or exceeds the limit of 10 million) and in the two tax periods prior to the latter.

This measure also applies to the event that this limit is exceeded as a result of a business restructuring that is accepted under the tax regime established in chapter VII of Title VII of the Spanish Corporation Tax Act, provided that the entities involved that have carried out this operation meet the conditions to be considered as of a small size both in the tax period during which the operation is carried out and in the two tax periods prior to the latter.

Tax benefits

Small companies can benefit from certain elements of a special repayment scheme:

  1. Freedom to depreciate

    1. For investments generating employment, in the form and conditions established in article 102 of the Corporation Tax Act.

    2. For low-value investments, the freedom of amortisation for low-value investments is limited to the previous revised text of the Tax Act in its article 110, the Company only replaced the new Corporation Tax Act with a similar benefit applicable to all taxpayers of the said tax and applies to the new tangible fixed assets, whose unit value does not exceed 300 euros, up to the limit of 25,000 euros referring to the tax period. If the tax period has a duration of less than one year, the limit indicated will be the result of multiplying 25,000 euros by the proportion between the duration of the tax period with respect to the year (article 12,3 of the Corporation Tax Act).

  2. Accelerated depreciation

    1. New items of tangible fixed assets and real estate investments, as well as intangible fixed assets, can be amortised by multiplying the maximum linear depreciation coefficient foreseen in the officially approved amortisation tables by 2.

    2. Intangible fixed assets whose useful life cannot be reliably estimated and goodwill may apply the percentage of 150% to the amount that is deductible from applying the provisions of article 12,2 of the Spanish Corporation Tax Act. In accordance with the provisions of that article, the depreciation will be deductible with the maximum annual limit of the veintaeava part of its amount (5%)

    3. Transitory rules: For the capital elements to which the transitional regime provided for in the thirteenth transitional provision of the Spanish Corporation Tax Act is applicable, i.e. those that, in tax periods beginning before 1 January 2015, were applying a depreciation coefficient other than that corresponding to them given by applying the repayment table provided for in article 12,1 of the Spanish Corporation Tax Act, the new useful life of the element must be determined according to the maximum linear coefficient set out in the table established in the Spanish Corporation Tax Act, to, once determined, multiply the coefficient by 2 by which to repay during the tax periods remaining until the end of its new useful life, on the existing net tax value at the start of the first tax period starting from 1 January 2015.

  3. Financial lease

    In relation to the assets acquired under the special financial lease regime, the part of the payments corresponding to the recovery of the cost of depreciable assets, with the limit of the three-fold linear depreciation coefficient according to officially approved repayment tables. The excess will be deductible in subsequent tax periods, respecting the same limit.

  4. Impairment losses on loans for possible insolvency of debtors (Article 104 Corporation Tax Act)

    Taxpayers who determine the return on their activity in the direct estimate regime may deduct the impairment loss of the credits for the coverage of the risk derived from possible insolvencies up to the limit of 1 per 100 on the debtors existing at the end of the tax period. For these purposes, debtors who have been individually recognised for impairment losses on credit for insolvency risk and debtors whose impairment losses are not deductible in accordance with article 13,1 of the Spanish Corporation Tax Act will not be included.

  5. Transitory rules: Amortisation of capital assets subject to reinvestment by companies of a small size

    Holders of economic activities that determine the net return using the direct estimation method and were applying before 1 January 2015 the amortisation of capital assets subject to reinvestment, which regulated article 113 of the revised text of the Spanish Corporation Tax Act, approved for companies with a reduced size by Royal Legislative Decree 4/2004, of 5 March, they may continue to apply it, with the requirements and conditions established in that article. For these purposes, the aforementioned article allowed the assets and property investments in the economic exploitation in which the reinvestment of the total amount obtained in the onerous transfer of tangible fixed assets and of the real estate investments also affected, in the coefficient resulting from multiplying the maximum linear depreciation coefficient foreseen in the officially approved repayment tables by 3.